Mortgage default notices at four-year low

Mortgage default notices for California homeowners have fallen to a four-year low as home prices showed increasing signs of stability, a research firm reported Tuesday.

There were 56,633 default notices filed in California from April through June, down 19.2 percent from 70,051 during the same period last year, according to DataQuick. That number was also down 17 percent from 68,239 in the first quarter of 2011, the San Diego-based firm said.

It marks the lowest tally since the second quarter of 2007 and is well under half the 135,431 notices filed when defaults peaked in the first quarter of 2009.

DataQuick President John Walsh said there were many theories to explain the drop in defaults, including bank policy changes, political backlash against aggressive foreclosure activity and lenders intentionally holding off on foreclosures so as not to flood the market with distressed properties.

But Walsh said solidifying home prices are surely one of the chief causes.

"Homeowner distress spreads fastest when home price declines are steepest," he said. "And it now appears likely that, barring some new economic shock, the worst of the price declines are behind us."

Default notices are the first step in the formal foreclosure process.

Statewide, the number of homes actually lost to foreclosure totaled 42,465 from April through June, down 10.9 percent from 47,669 in the same period last year and down 1.4 percent from 43,052 from January through March.

The all-time peak was 79,511 in the third quarter of 2008.

Default notice declines were most pronounced in the state's least-expensive communities, where foreclosure activity has been most severe. In ZIP codes with median home prices less than $200,000, default notices tumbled 23.9 percent from the second quarter of 2009, while areas with home prices above $800,000 registered a 10.7 percent drop.

The most affordable markets also continued to see the greatest concentration of defaults. In ZIP codes with median home prices less than $200,000, there were 8.7 default notices filed for every 1,000 homes from April through June, while there were 2.4 notices for every 1,000 homes in areas with median prices greater than $800,000.

William Roberts, director of the San Fernando Valley Economic Research Center at California State University, Northridge, said the foreclosure situation is playing out as expected.

The steep drop in activity means that most of the foreclosures that resulted from shady loans that triggered the housing collapse have worked their way through the system. Now, the market is reflecting borrowers who have lost jobs and are struggling with high unemployment.

"We'll probably still be talking about foreclosures next year, but not as a major problem," Roberts said.